Hi Kennyboi
The first thing you need to look at is if you city council allows granny flats to be built in your suburb. The next thing you need to consider is what would you do if the council changed the rules ie. in a local council recently they changed the rules to say granny flats can now only be rented to someone who is a relative of the person living in the front house.
You also have to consider that you will be limiting your market when you sell the property as not everyone wants to buy as house with a granny flat attached.
You will be subject to capital gains and tax for the granny flat as it will be an investment you are receiving income on. As for privacy, it depends on how it is built and where the access points are etc. to how much privacy you will lose.
A granny flat will cost you around $130,000 to build but will not add any more than that in value to your property. The benefit of a granny flat is the extra cash flow only. Have you thought of other strategies as there are quite a few out there which can create equity and cash flow at the same time.